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Establishing a 34-nation Free Trade Area of the Americas agreement has been under negotiation since 1998. This agreement would eliminate tariffs and create common trade and investment rules for these nations. Most recently, the United States, along with Brazil, assumed the leadership of the negotiations. GAO was asked to analyze (1) the challenges for the current negotiating phase, which will include a ministerial meeting in Miami, Florida, in November 2003; and (2) the U.S.'s readiness to serve as co-chair of the negotiations and host of the November 2003 ministerial.

USTR, which is responsible for co-chairing the Free Trade Area of the Americas negotiations and hosting the November 2003 ministerial meeting, faces challenges to its readiness to assume these responsibilities. During the current negotiating phase, achieving improved market access for the 34 nations is paramount. It may be difficult, however, for participants to make ambitious offers to lower tariffs and other trade barriers. Another challenge involves the resolution of issues such as subsidies for agriculture. The resolution of this issue has been linked to ongoing negotiations at the World Trade Organization, but these talks are bogged down. A further challenge is ensuring the momentum and the political will of the United States and Brazil to move the process forward to a timely completion by January 2005. As co-chair of the negotiations, USTR also faces risks to assuring its readiness as host of the November ministerial. First, USTR has little experience in hosting a major ministerial meeting, and its staff remains small and is stretched thin. Second, plans for the meeting are at an early stage, and much remains to be done. Third, USTR is counting on funding that has not yet been secured. And finally, USTR is likely to encounter protestors at the November ministerial. Factoring security for the invited participants into the logistical arrangements for the ministerial is a prime concern.

Recommendation for Executive Action

Status: Closed - Implemented

Comments: In response to the GAO recommendation, USTR took a number of actions as described by Peter Allgeier, Deputy U.S. Trade Representative, in sworn testimony before the Senate Finance Committee on May 13, 2003, approximately 6 months prior to the ministerial. In terms of how USTR had addressed specific risks that we highlighted in our recommendation, Deputy Trade Representative Allgeier stated that USTR staff were working with the Departments of State and Commerce to supplement USTR staff; that USTR had requested $1.3 million in supplemental funding for the ministerial; that there was coordination with security forces from each of the four jurisdictions to ensure the security of participants at the ministerial. Deputy Trade Representative Allgeier also stated that they reviewed very carefully the GAO report on the FTAA and that USTR was already implementing a number of the suggestions of GAO, including completing a memorandum of understanding regarding roles and responsibilities with the Miami organizers. Finally, in response to a question, Deputy Trade Representative Allgeier in indicated that USTR was aware of the risks associated with co-chairmanship of the negotiations with Brazil, and that they were carefully assessing the implications of the change in leadership in Brazil on the substance of the negotiations. The statement by the GAO witness at that hearing (Loren Yager) also noted other USTR actions that were responsive to the risks in the recommendation. These included the announcement of additional staff positions at USTR that would be assigned to the preparations for the Ministerial.

Recommendation: In order to successfully carry out the responsibilities involved in co-chairing the Free Trade Area of the Americas negotiations and hosting the November 2003 Miami ministerial, the USTR should intensify U.S. preparations and promptly and regularly evaluate whether current resources and plans are sufficient to carry out the tasks and mitigate the risks associated with these two responsibilities. The risk we have identified are (1) handling the increased workload associated with co-chairing the negotiations and hosting the Miami ministerial with limited staff at USTR; (2) resolving procedural and substantive issues through the co-chairmanship; (3) acquiring sufficient expertise in planning major events; (4) clarifying and further developing plans for the Miami ministerial; (5) securing sufficient funding for the ministerial; and (6) ensuring the security of participants at the ministerial. Several of these resources and plans involve allowing significant lead time, which the USTR should take into consideration.

Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative